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October 27, 2015

Publicly traded Turkish taxpayer targeted by Erdoğan-backed court

The decision late on Monday by a controversial Turkish court to place one of the country's largest publicly listed conglomerates and sole gold producer in receivership sparked a massive public outcry as political figures and market experts condemned the decision as the “hijacking” of an esteemed business group.
The move has also sparked concerns over the future of foreign investment into Turkey amid fears that Sunday's (Nov. 1) election could result in more authoritarian policymaking that damages the business environment.

Turkish media reported on Monday that the interim Justice and Development Party (AK Party) government has appointed a trustee to take over the management of Koza İpek Holding, which owns media outlets that are critical of the government, along with 22 subsidiaries. The Koza-İpek group has three of its subsidiaries currently trading on the main Turkish stock exchange known as Borsa İstanbul (BİST) and 70 percent of the shares of those companies belong to foreign partners. The group's gold producer subsidiary, Koza Altın, was the fourth private industrial enterprise on the list of government's top taxpayers in 2014 with TL 113.57 million. Critics said Monday's court decision had no legal basis, stressing that the court abused its privileged power to engineer a botched legal pretext to invade one of Turkey's most successful conglomerates. The decision came following a demand by the 5th Ankara Criminal Court of Peace, a court designed and established by then-prime minister Recep Tayyip Erdoğan's government to pursue its critics and opponents by orchestrating what many have said are sham trials in politically motivated cases. Officials, backed by riot police in gas masks, entered the Koza-İpek headquarters in Ankara hours after news reports that the company had been placed under "administrative receivership." Koza said it had received no such information. This latest incident of Turkish government interference in a private company is a typical example of the openly authoritarian policies employed by President Erdoğan over the past two years. Erdoğan is accused of sidelining market-friendly, capable policymakers in favor of inexperienced bureaucrats of whom he expects unquestionable loyalty.

Are investors safe in Turkey?

Monday's court decision drew rebukes from economists and columnists in many areas, most of whom highlighted the growing threats against property rights in Turkey.

This is the second such politically motivated intervention into the Turkish stock market this year after the government handed over control of Bank Asya, an Islamic lender, to the state-run Savings Deposit Insurance Fund (TMSF) in June. The bank was already being administered by an interim board assigned by the TMSF on Feb. 3, when the months-long political pressure on the bank was intensified. “Think of a country in which companies and lenders are frequently exposed to interventions that irk [financial] markets no matter [whether] there is a court order or not. … It has been an expected case and has not surprised me. But it can have a daunting [effect] on markets. …To hand over such a group that contains publicly traded companies as well as media firms would be found strange by both domestic and international investors, even if there is a court order for the decision. Such practices are very sensitive for markets,” said Prof. Doğan Cansızlar, former president of the Capital Markets Board (SPK).

Sami Karahan, a Marmara University professor of commercial law, said: “You cannot explain to the world that you [have taken] over a publicly traded company with the decision based on a trivial reason. Foreign investors would not come to such a country. The rule of law is missing.” And Mehmet Altan, a professor of economics at İstanbul University, said: “The decision is completely despotic. It is tantamount to armed robbery.”

Economist Süleyman Yaşar remarked: “Nearly $64 billion worth of foreign investment has left Turkey over the recent period. Such practices scare off businessmen and wreak havoc on the Turkish economy. They especially thwart foreign investment into the country and contribute to investment outflows.”

“It has become one of the heaviest tolls dealt on democracy. Mustafa Varank [a senior aide to Erdoğan] was over the weekend proven to have demanded that groups' channels be removed from Türksat's infrastructure,” Atilla Yeşilada, an economist with the New York-based Global Source Partners said.

A columnist and a former central banker, Uğur Gürses, said: “The rule of law has been [laid to waste in the country]. The recent decision seems [to be] the continuation of this process as well. The decision is inexplicable with regard to the rule of law though they [the government] seek to justify the decision with a legal pretext. The decision also shows that entrepreneurs critical of the government are under risk in Turkey. And this is the worst thing against this country.”

Meanwhile, the Turkish Confederation of Businessmen and Industrialists (TUSKON) said in a written statement on Tuesday that the controversial court decision to seize Koza group companies was another blow to free entrepreneurship and media in Turkey. “We condemn this decision since it will deal a remarkable blow to Turkey's credibility as a safe haven for investors,” the statement read.

Erdoğan loyalists appointed to board of Koza

It turned out on Tuesday that the board of trustees appointed to Koza were largely partisan figures with close links to the AK Party. “The appointment of partisan figures to such a large company will further dent confidence. … These investors had purchased and traded Koza shares because they had faith in a healthy management, now they will feel deceived,” an anonymous Treasury expert told Today's Zaman on Tuesday.

Reactions from opposition parties also poured in on Tuesday. CHP deputy Sezgin Tanrıkulu submitted a parliamentary question on Tuesday regarding the controversial intervention into Koza. Durmuş Yılmaz, a former central bank governor and now a deputy candidate for the Nationalist Movement Party (MHP), said: “They literally seized the man [Akın İpek's] companies. This is nothing short of an encroachment on [his] property rights.” Underlining that the issue concerns legal experts, he added: “We can talk about the economic ramifications of it. …People would not like to make investments or produce in a country where property rights are dispossessed. This aimed to spread fear into the public.” The decision was also criticized by judicial experts.

Lawyer Yasemin Bal stated that a decision such as appointing a trustee to take over a company's management should require concrete evidence. “These companies have thousands of employees and hundreds of suppliers. Such things pose serious risks to the economy,” the Hürriyet daily quoted Bal.

In the same daily, lawyer Hüseyin Poyraz, underlined that trustees are required by law to act impartially, and that they would be committing a crime if they act in accordance with the demands of political authority.

AK Party overlooks terror financing, targets political dissidents

The AK Party government is abusing the powers it gained when Parliament approved Law No. 6,415 on the Prevention of the Financing of Terrorism on Feb. 7, 2013, to clamp down on critical voices, a Treasury expert said on Tuesday. “The AK Party government has never applied for the asset seizure to a person or a group that is seen financing a listed terrorist group, but is exerting all of its energy to crush the opposition. … Not a single asset belonging to or financing such terrorist groups as the Kurdistan Workers' Party (PKK) or the revolutionary People's Liberation Party/Front [DHKP/C] were frozen under the AK Party.”

Last month, police raided offices of parent company Koza Ipek Holding seeking financial documents. A court search warrant at that time showed that Koza Altın and group subsidiary Koza Anadolu Metal were being investigated on suspicion of financing terror and terror propaganda. The company denied the allegations. Monday's court decision failed to provide any proof as to the alleged terror financing but said the company's balance sheets were “too perfect and flawless.” The court decision came after reports emerged saying that the Turkish government was planning to seize Koza İpek Holding ahead of the Nov. 1 general election by orchestrating falsified reports issued by the Finance Ministry's Financial Crimes Investigation Board (MASAK).

Koza İpek may not be the only one the government plans to seize. Earlier this year, Twitter whistleblower Fuat Avni claimed that the government and Erdoğan revised a planned crackdown on critical media outlets to also include some leading Turkish investors. Doğan Media Group owner Aydın Doğan, as well as other businesses including the Kavala, Eczacıbaşı and Boyner groups are targeted, he revealed.

Avni said: “Doğan will be accused of financing the PKK and the revolutionary People's Liberation Party/Front [DHKP/C], Eczacıbaşı and Muharrem Yılmaz of funding 2013's nationwide anti-government Gezi protests, the Boyner Group for funding the pro-Kurdish Peoples' Democratic Party [HDP] and Osman Kavala for supporting the PKK.” Avni also alleged that the government had decided to delay a crackdown on one of Turkey's largest corporations, Koç Holding, “to avoid overreaction.”

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